Monday, March 16, 2009

The Employee Free Choice Act should be stopped

Once upon a time, perhaps 100 years ago, unions may have made sense. When the economy was industrialized and dominated by a handful of monopolies, when labor mobility was restricted, when communications were inefficient, labor might have been at such a large negotiating disadvantage that perhaps unions were needed to counter exploitation from the so-called "owners of capital."

But unions are an anachronism today. At any given time, even during a deep recession, there are millions of job opportunities, offered by hundreds of thousands of companies throughout the United States. Indeed, with the growth of the internet, it is possible to take a job on the other side of the country (or even outside the country) without having to move. Furthermore, the US government has zealously applied antitrust law to break up monopolies and prevent any one sector of the economy from becoming dominated by a single corporate entity.

From an economic perspective unions are bad for at least three reasons.

First, the union bureaucracy is a dead weight loss to the economy. That is, the time and effort spent operating unions, regulating them, defending them, and fighting them could be better spent producing real goods and services which improve our aggregate standard of living.

Second, unions extract higher compensation for low-productivity jobs, which (a) is an unfair transfer of wealth to union members, which inevitably comes at the expense of non-union workers in the form of uncompensated higher prices for goods and services; and (b) causes a misallocation of labor. For example, an auto worker producing $50/hour in value but being paid $45/hour will not do a different job in which he is capable of producing $60/hour in value but is paid only $40/hour.

Finally, unionized workers are not properly incentivized to work hard and do a good job because both their upside and their downside is limited. No matter how good an employee is, his compensation will be constrained by the union contract. No matter how bad an employee is, his firing will be fought by the union. In my view, the main problem we have with public education is that the powerful teachers' unions strip the teaching profession of any traces of a meritocracy.

As for the Employee Free Choice Act (EFCA), it is hard to overstate the deceit of its proponents.

Under current law, workplace union organization starts with a card check process, in which employees are asked by organizers to sign a card requesting representation by a union. If at least 30% of workers sign the cards, then the organizers can hold a secret ballot election which determines by majority vote whether or not a union will be formed. If at least 50% of workers sign the cards, the organizers generally will just present the cards to the National Labor Relations Board (NLRB) for union certification, but then the company can insist on a secret ballot election. Either way, there will almost always be a secret ballot election in which the will of the majority is expressed. If a majority votes against unionization, then a union will not be formed.

One of the changes the EFCA would make is the following: if more than 50% of the employees sign the authorization card, the union will be certified automatically. There will be no secret ballot election.

It's pretty obvious that the EFCA does the exact opposite of its name. Workers will have to decide out in the open, possibly under duress, whether or not to sign an authorization card. And if 1 out of 2 of their fellow workers sign the card, they won't be able to retract their decision to sign (i.e. their decision to support unionization publicly) in a secret ballot election.

I can't sugarcoat this. The EFCA is a desperate measure created to fight declining union membership by trying to force unionization on reluctant workers through intimidation. Its proponents who argue otherwise are malicious liars.